Time for a new economic paradigm

Updated 12:38 pm, Friday, March 8, 2013

Honest financial advisers have always warned investors to avoid both euphoric buying and panic selling. This advice is constantly published and publicized, but time after time investors buy as the market goes up and sell at the bottom.

Investors sell low then blame the market for their folly. They forget the whole thing and tread the garden path again. Now, they are pushing Wall Street to new highs, and overseas some are creeping back to Greece and Argentina, countries that gave them the Mother of all Haircuts not so long ago. Actually, there may be some good to this.

If some didn't buy high and sell low, nobody would make a killing in the market.

This seeming stupidity may be a genetic human trait: Most people are herd animals who go with the flow and follow the crowd over the cliff, whether investing or voting. There may also be a moral factor. Americans stick with winners until they lose, then spit on losers while they're down.

That's not very nice.

Gen. George Patton observed this American trait, and while he regarded it with some contempt, he always tried to make use of it. By winning, of course.

This same malaise has turned the stock markets from long-term investment houses into big casino gambling dens seeking a quick buck. This leads to probably the major flaw in professional corporate management. A family firm can think in terms of generations; a professional manager with “investors” breathing down his neck must think in quarters, which turns investing into “gaming.”

Having trashed personal investment into something beyond all recognition, we have done worse with government. It now justifies every budget-busting measure as an investment, though the money is mostly spent for consumption. Every financial expert has pointed out that borrowing money for consumption is the height of financial stupidity. What applies to individuals should apply to government.

However, our lives and economy are now built upon consumption rather than production, the result of technology and the Industrial Revolution. As sardonic writers have suggested, we mainly need people now as consumers. A few people can produce all the cat food and Cadillacs the market needs, which is why bureaucrats and paperwork have proliferated. Society has to let the people do something. Conventional elite wisdom now urges citizens to borrow money and blow it.

But the world my grandfather lived in (anything you don't need is dear at any price) doesn't work anymore. If I don't buy things I don't need, another consumer will go on the public purse. With idiot ideas of investment, we are always broke.

I think we need a new paradigm. The old ones, left and right, are beginning to smell like dead mackerel. This paradigm would create employment according to ability, whether butler or bureaucrat. It would maintain social hierarchies, which are natural to our species. It would allow jobs to pay a living, while creating a society where no one surrenders his reward. It would keep the value of exchange under tight control.

Hey, Ben Bernanke, if you want to become iconic, quit fiddling with your funny money and go to work.